Babcock & Wilcox amends covenants, pricing under revolving facility

By Marisa Wong

Morgantown, W.Va., Aug. 13 – Babcock & Wilcox Enterprises, Inc. entered into an eighth amendment on Aug. 9 to its credit agreement dated May 11, 2015 with Bank of America, NA as administrative agent and lender, which provides for a $600 million senior secured revolving credit facility due June 30, 2020, according to an 8-K filing with the Securities and Exchange Commission.

The amendment, among other things,

• Modifies the definition of adjusted EBITDA to exclude up to an additional $72.8 million of charges for some renewable segment contracts for periods including the quarter ended June 30 and allows further add backs to EBITDA for restructuring and other similar expenses;

• Modifies financial covenants as described below;

• Changes the amount of liquidity the company is required to maintain to at least $50 million (or $40 million upon the completion of asset sales and the receipt of at least $10 million of proceeds from last-out loans) as of the last business day of any calendar month and on any day that a borrowing is made from at least $65 million as of the last business day of any calendar month;

• Lowers the amount of outstanding borrowings under the revolver that the company is required to repay with excess cash to $50 million from $60 million;

• Modifies the company’s ability to reinvest net cash proceeds from asset sales that trigger prepayment requirements to allow for the ability to retain up to $25 million of asset sale proceeds after receipt of last out loan funding;

• Permits an additional $15 million of cumulative net income losses attributable to eight specified Volund contracts for the fiscal quarter ending Sept. 30;

• Modifies some contract completion milestones that the company is required to meet in connection with six European renewable loss contracts;

• Amends the date by which the company is required to sell at least $100 million of assets to Oct. 31, 2018 from March 31, 2019;

• Requires the company to achieve some concessions from its renewable contract customers by Sept. 30 that will generate at least $25 million of incremental benefits to the company;

• Adds additional events of default related to the termination or rejection of contracts related to the company’s renewables segment;

• Permits and requires the company to raise up to an additional net $30 million of last-out loans under the credit agreement;

• Consents to the sale of Palm Beach Resource Recovery Corp.; and

• Eliminates a requirement to adjust on a pro forma basis our EBITDA after the sales of Megtec and Universal and Palm Beach Resource Recovery.

In addition, consolidated capital expenditures in each fiscal year are limited to $27.5 million.

The credit agreement requires the company to make prepayments on any outstanding revolving loans after receipt of cash proceeds from asset sales or other events, with some exceptions. These prepayments may require the company to reduce the commitments under the credit agreement by a corresponding amount. Following the covenant relief period, these prepayments will not require the company to reduce the commitments under the amended credit agreement.

Loans under the amended credit agreement bear interest at Libor plus 500 basis points during 2018, stepping up to Libor plus 600 bps for 2019 and Libor plus 700 bps for 2020.

The company must also pay a commitment fee of 100 bps on the unused portions of the revolver, a letter-of-credit fee of 250 bps for each financial letter of credit outstanding and a letter-of-credit fee of 150 bps for each performance and commercial letter of credit outstanding.

Additionally, an annual facility fee of $1.5 million is payable on the first business day of 2018 and 2019, and a prorated amount is payable on the first business day of 2020. A deferred fee of 250 bps is charged but may be reduced by up to 150 bps if the company achieves specified asset sales.

The amended credit agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter.

The maximum permitted senior debt leverage ratio is 9.75 to 1.0 for the quarters ended June 30 and ending Sept. 30; 4.00 to 1.0 for the quarter ending Dec. 31; 3.50 to 1.0 for the quarter ending March 31, 2019; and 2.25 to 1.0 for the quarters ending June 30, 2019 and each quarter after that.

The minimum consolidated interest coverage ratio is 1.00 to 1.0 for the quarter ended June 30; 1.25 to 1.0 for the quarter ending Sept. 30; 2.00 to 1.0 for the quarter ending Dec. 31, 2018; 2.50 to 1.0 for the quarter ending March 31, 2019; and 3.50 to 1.0 for the quarters ending June 30, 2019 and each quarter after that.

Babcock & Wilcox is a Charlotte, N.C.-based power generation company.

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